NAIROBI, Kenya – The cost of living in Kenya has surged to its highest level in over two years, driven by the compounding effects of a global oil supply shock and escalating tensions in the Middle East. The latest data released by the Kenya National Bureau of Statistics (KNBS) on Friday shows that the Inflation and Fuel Prices Rise has pushed the annual inflation rate to 6.7 percent in May, up sharply from 5.6 percent in April .
This marks the second consecutive monthly acceleration in consumer prices and represents the highest inflation figure recorded since January 2024, bringing the rate dangerously close to the government’s upper preferred limit of 7.5 percent . The surge is eroding workers’ disposable income and putting immense pressure on businesses already grappling with a volatile operating environment .
Transport and Food Lead the Surge
According to the KNBS Consumer Price Index report, the Inflation and Fuel Prices Rise is primarily structural, driven by escalating costs in three key expenditure categories that account for more than 57 percent of the average household budget .
Transport costs recorded the most dramatic jump, soaring by 16.5 percent year-on-year. This was followed by food and non-alcoholic beverages, which rose by 9.4 percent, while housing, water, electricity, gas, and other fuels increased by 3.4 percent .
The high cost of transport is a direct consequence of record-high pump prices. Data from the Energy and Petroleum Regulatory Authority (EPRA) shows that a litre of petrol now retails at a historic high of Sh214.25 in Nairobi. Diesel, the lifeblood of the economy powering public transport, agriculture, and manufacturing, has risen even more sharply to Sh242.92 per litre .
Geopolitical Conflict Triggers Global Shock
The root cause of the current economic distress lies thousands of miles away in the Middle East. The Inflation and Fuel Prices Rise has been exacerbated by the ongoing US-Israel conflict with Iran, which escalated on February 28, 2026 . This conflict has caused major disruptions at the Strait of Hormuz, a critical chokepoint through which nearly one-fifth of the world’s oil supply passes daily .
Since the conflict began, global fuel prices have risen sharply. Data indicates that the landed cost of diesel has increased by 118.5 percent, while kerosene has seen a 126.4 percent hike . For a net energy importer like Kenya, which relies almost entirely on imported refined petroleum, these global spikes have translated directly into higher retail prices .
“The global oil supply shock has been exacerbated by disruptions at the Strait of Hormuz,” a government statement noted, highlighting the severity of the crisis .
Government Intervention and Diesel Subsidy
In response to the public outcry and planned strikes by transport stakeholders, the government has moved to cushion consumers from the full weight of the Inflation and Fuel Prices Rise.
President William Ruto held a high-level meeting with transport sector stakeholders in Mombasa on Friday, where he unveiled a raft of stabilization measures . Key among these is a directive to reduce the price of diesel by an additional Sh10 per litre in the upcoming June–July pricing cycle .
To achieve the current prices, the government has utilized massive fiscal resources. The State revealed that it has committed a total of Sh28.19 billion across the April-May and May-June pricing cycles through direct fuel stabilization measures and tax relief interventions .
This includes the reduction of Value Added Tax (VAT) on petroleum products from 16 percent to 8 percent, for which the government forewent Sh6.41 billion in revenue in the April cycle alone . Without these interventions, the President warned that diesel would currently be retailing at Sh277.75 per litre—a price that would have crippled the economy .
Business Community Sounds Alarm
Despite the government’s efforts, the business community is warning that the current trajectory is unsustainable and threatens Kenya’s competitiveness.
The Kenya National Chamber of Commerce and Industry (KNCCI) noted that while global crude oil prices increased by approximately 10.7 percent between the April and May pricing cycles, the cost of diesel in Kenya rose by 23.5 percent during the same period . This disparity suggests that domestic factors, including taxes, levies, and exchange rate depreciation, are amplifying the external shock.
“Diesel is the backbone of transport, agriculture, manufacturing, logistics, construction, and general trade. Any increase in diesel prices quickly feeds into the cost of moving goods, producing essential commodities, and delivering services across the economy,” KNCCI President Dr. Erick Rutto stated .
He further warned that Kenya remains a relatively high-cost fuel market compared to regional peers like Uganda and Tanzania, which weakens the country’s competitiveness in logistics and manufacturing .
Monetary Policy Implications
The Inflation and Fuel Prices Rise is expected to limit the Central Bank of Kenya’s (CBK) ability to ease monetary policy. The CBK is scheduled to announce its next interest rate decision on June 9 . Having left the benchmark lending rate unchanged at its April meeting to assess the impact of the global shock, analysts suggest that the elevated inflation may force the regulator to maintain a hawkish stance, potentially freezing the recent decline in lending rates .
While the government remains committed to long-term solutions—including fast-tracking investments in renewable energy, electric mobility, and a proposed regional oil refinery—the immediate outlook suggests that Kenyan households will continue to feel the heat of the Inflation and Fuel Prices Rise as long as the Middle East conflict persists.